EDABS 201 Management Accounting and Controls MAC 15

EDABS 201 Management Accounting and Controls (MAC) – 15 credits Facilitator Priyanka Darshana MBA(Strategy), ACMA(UK), CGMA, ACMA( SL), B. B MGT(MKTG)SP

Module content 1. Development of management accounting practices: before and after the “Relevance Lost” thesis – 10% 2. Preparing budgets and a reflection on them in terms of business plans, KPIs, balanced scorecards, and similar PMS practices – 25% 3. Recent developments in cost management practices and their relationship with the PMS contexts above and strategic significance thereof -20% 4. Use of decision-making tools in the context of varying management scenarios – 15% 5. Recent developments in management control practices and their relationships with management information systems in organizations – 20% 6. Preparing basic management reports focusing on management scenarios and emphasizing the use of management accounting tools – 10%

Assessment Methods 1. 40% - In-course assignment: 2500 – 3000 word essay on an evaluation of the development of management accounting practice 2. 60% - Final unseen exam: 3 -hour closed book exam

Accounting “Accounting is provision of information for the relevant stakeholders of the business”

Branches of Accounting for Information purpose Accounting Financial Accounting External reporting Management Accounting Internal reporting Financial Management - Investment Decision - Finance Decision - Dividend Decision

Role of Management Accounting Informations Managers

Management Accounting Management accounting is the process of identifying, measuring, reporting and analyzing information about economic events of organization. The process should be driven by the informational needs of individuals internal to the organization and should guide their operating and investment decisions (Atkinson et al, 1997).

Organizational function and Management Accounting information Operational control Provide feedback information about the efficiency and quality of tasks performed Product and customer costing Measure the costs of resources used to produce a product or service and market and deliver the product or service to customers Management control Provide information about the performance of managers and operating units Strategic control Provide information about the enterprise’s financial and long-run competitive performance, market conditions, customer preferences, and technological innovations.

RELEVANCE LOST. THE RISE AND FALL OF MANAGEMENT ACCOUNTING” by H. Thomas Johnson and Robert S. Kaplan, Harvard Business School Press, Boston, MA, 1987 "Relevance Lost" is an overview of the evolution of management accounting in American business, from textile mills in the 1880 s and the giant railroad, steel, and retail corporations, to today's environment of global competition and computer-automated manufacturers”

Diffusion of Management Accounting Cost Accounting Before 1950 Cost focus Management Accounting 1950 -1985 Profitability & Waste reduction Strategic Management Accounting After 1990 Customer value & Shareholder value 1950 -2013 Sustainable Management Accounting 2013 Economic, Environmental and Social

Management Accounting and Changing Business Landscape By the 1990 s, many organisations realised that they needed to improve their product and service quality, delivery responsiveness and cost performance in order to improve market share and profits Competitive success factors are fast response, innovation, operational excellence and customer intimacy. Adoption of new management structures, systems and practices, including new management accounting techniques and systems

SMA “In increasingly dynamic environment the provision of strategically relevant information is paramount importance to formulate and execute the business strategies and methods of providing such a information is SMA” Dixon & Smith (1993)

What is SMA? “ SMA considers the plans of competitors, where the main objective is to place and keep the firm in a position of competitive advantage. Therefore SMA is collection of competitor information, exploiting the cost reduction opportunities, and matching of accounting emphasis with strategic position” Lord(1996)

Strategic information Internal organizational information Strategic planning, execution and control External information

Strategic Management Accounting practices Balance score card (BSC) Activity base costing(ABC) Activity base management (ABM) Value chain analysis Life cycle costing Target costing Customer profitability analysis Product profitability analysis BCG Matrix Porters generic strategy Ansoff matrix Porters 5 forces Analysis

Rational planning model (RPM)